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Taking out loans can be necessary for many things in life from buying a house to starting a business. There are many different types of lender you can choose from – and each has their own perks and pitfalls. This post compares 5 lender options to help you decide the right one for your borrowing needs.
Private lender
Private lenders are the most popular option when taking out a loan. These companies specialise in providing loans to a variety of causes from mortgages to debt consolidation. Many people choose to borrow from private lenders because they often have some of the lowest eligibility requirements and a fast approval rating (some can deposit the money in your bank within a day). The downside of private lenders is that they can often charge higher interest rates than other lenders.
Bank
Banks are also able to offer loans for a variety of causes but typically offer much lower interest rates. This can make them an attractive option for those who want to save money in the long run. Banks tend to be more picky as to who they lend to and you may struggle to get approved for a bank loan if you have a poor credit score. The loan may also take a few days to process, so it isn’t an option for those who need money urgently.
Credit union
Credit unions are nonprofit organizations. Many offer the same range of services as a bank but typically offer a more personalized service with flexible loan options and lending criteria. Interest fees on credit union loans can be even lower than those offered by private lenders and banks. Unfortunately, there are fewer credit unions to choose from and some are only eligible for people living in a certain area or people living under a certain income. An online credit union can be a more accessible option. Some require you to become a member first and may require you to make a deposit in a credit union account first.
Peer-to-peer lender
Using a peer-to-peer lending platform, it’s possible to borrow money from individual investors around the world. These investors make a return by charging interest – and the interest rates can vary massively from individual to individual. Eligibility requirements also vary – some investors are only willing to lend to those with a high credit score, while others are much more generous. It can therefore be a way to access low interest loans or loans that don’t require a credit check. Just be wary that many peer-to-peer lending platforms may charge additional facilitating fees for using their platform.
Friends/family
A final option to consider is to borrow money from family or friends. A family member or friend typically won’t charge interest and may be willing to arrange a more flexible schedule for paying back the money. Of course, such loans can strain relationships if you fail to pay them back as promised. You should also be careful of borrowing from family and friends who are likely to demand back the money before you are ready to pay it.
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